Pak economy size shrinks to $264 bn

ISLAMABAD: With the contraction of Pakistan’s GDP growth rate that falls into zero range at negative -0.38 percent for the outgoing fiscal year, the total size of the country’s economy and per capita income are expected to shrink significantly in terms of dollar in post Covid-19 pandemic.

The total size of Pakistan’s economy in terms of dollars has decreased up to US$264 billion for outgoing fiscal year 2019-20 against revised estimates of US$279 billion. Meanwhile, Pakistan’s per capita income had also nosedived into US$1,271 during the current fiscal year 2019-20 against US$1,363 for the last financial year 2018-19. The government has failed to achieve the GDP growth rate target as it stood negative at -0.4 percent against the estimated fixed target of positive 3.3 percent for the outgoing fiscal year. The growth rate plunged into the negative zone for the first time in the last 68 years as it had reached once into the negative zone at 1.8 percent during the financial year of 1951-52.

The National Accounts Committee (NAC) after its meeting here on Monday, announced provisional estimated GDP growth rate of negative -0.4 percent (precisely -0.38 percent) for the outgoing fiscal year. Except agriculture and financial business sectors, all other sectors of the economy have so far attained negative growth. The agriculture sector achieved positive growth of 2.7 percent with major crops growth of 2.9 percent and livestock sector growth of 2.6 percent, while the manufacturing sector registered negative growth of -5.6 percent for the outgoing fiscal year as large scale manufacturing (LSM) sector also showed negative -7.8 percent growth.

The services sector witnessed negative -0.6 percent growth for the outgoing fiscal year against revised estimates of positive 3.8 percent for the last financial year. The wholesale and trade registered negative growth of -3.4 percent, transport, communication and storage at negative -7.1 percent for the outgoing fiscal year, while the financial businesses have registered positive growth of 0.8 percent for the outgoing fiscal year. According to the announcement after 102nd NAC meeting, it stated that the provisional estimates of the GDP and Gross Fixed Capital Formation (GFCF) for the year 2019-20, were presented on the basis of latest data of 6-9 months, which were annualised by incorporating the impact of Covid-19 for the final quarter.

The provisional growth of GDP for the year 2019-20 was estimated at -0.38 percent, which is based upon the growth estimates of the agricultural, industrial and services sectors at 2.67 percent, -2.64 percent and 0.59 percent, respectively. The sectors are discussed below briefly.

Agricultural Sector

The agriculture sector grew by 2.67 percent and the growth of important crops during this year is 2.90 percent. This increase is due to the increase in production of wheat, rice and maize at 2.45 percent, 2.89 percent and 6.01 percent, respectively. However, the cotton and sugarcane crops have witnessed negative growth of -6.92 percent and -0.44 percent, respectively. Other crops, including onion, potato, and other vegetables showed positive growth of 4.57 percent mainly because of increase in production of pulses, oil seeds and vegetables. Meanwhile, livestock sector registered a growth of 2.58 percent, which is deviation from its historical growth primarily because of shrinkage in demand for dairy and poultry, and the forestry has grown at 2.29 percent due to increase in production of timber.

Industrial Sector

The overall industrial sector has witnessed a negative growth of -2.64 percent mainly because of Covid-19 related lockdown of the industrial units. The value added in the mining and quarrying sectors has declined by 8.82 percent, while the Large Scale Manufacturing (LSM) sector, which is driven primarily by QIM data (from July 2019 to March 2020), showed a decline of 7.78 percent. Major decline has been observed in textile -2.57 percent, food, beverage & tobacco -2.33 percent, coke and petroleum products -17.46 percent, pharmaceuticals -5.38 percent, chemicals -2.30 percent, automobiles -36.5 percent, iron and steel products -7.96 percent, electronics -13.54 percent, engineering products -7.05 percent, and wood products -22.11 percent.

The major positive growth in LSM was observed in fertilizer 5.81 percent, leather products 4.96 percent, rubber products 4.31 percent and paper & board 4.23 percent. Electricity and gas sub sector have grown by 17.70 percent mainly due to higher subsidies and better value added in WAPDA and companies. The construction activity has also increased by 8.06 percent mainly due to increase in general government expenditure.

Services Sector

Globally, the services sector has been impacted the most by the Covid-19 related shrinkage in the overall economy. Pakistan’s services sector has remained a major growth driver for many years and it has witnessed a rare contraction of 0.59 percent in the provisional estimates, while wholesale and retail trade sector contraction by 3.42 percent, the transport, storage and communication sectors have an overall negative growth of -7.13 percent. The finance and insurance sectors have showed a modest increase of 0.79 percent. The remaining components of services i.e. housing, general government and other private services have witnessed a positive growth of 4.02 percent, 3.92 percent and 5.39 percent, respectively.

GDP at Current Market Prices

The GDP at current market prices has also been computed and stands at Rs41,727 billion for 2019-20, shows a growth of 9.9 percent over Rs37,972 billion for 2018-19. The per capita income for 2019-20 was calculated as Rs214,539 for 2019-20 showing a growth of 8.3 percent over Rs198,028 during 2018-19.